Bailout review delay could stretch for months

20 December 2016
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After last week’s roller-coaster ride, which saw an escalation in tensions between the government and international creditors over a unilateral decision by Athens to grant a one-off Christmas supplement to low-income pensioners and Berlin’s snub to Prime Minister Alexis Tsipras’s plea to intervene in the kerfuffle, Greece is now faced with the ominous prospect of further delays – possibly months – in the wrap-up of the second review of its third bailout.
Sources describe such delays in the negotiations as the “worst possible scenario,” which could undermine the economy’s recovery and essentially pull the rug from under the leftist-led government’s narrative, which envisioned a fast completion of the review in order to start talks on longer-term debt relief and gain access to the European Central Bank’s quantitative easing mechanism.

Given the long-drawn-out and acrimonious negotiations for the country’s third bailout in 2015, which brought Greece to the brink of an exit from the eurozone, the urgency of the situation is now weighing heavily on the SYRIZA-led coalition, whose approval ratings have plummeted in recent opinion polls.
However, the government’s most immediate priority is to deal with the European Stability Mechanism’s freeze on the package of short-term debt relief measures that was decided by the Eurogroup earlier in the month in response to the Christmas bonus for pensioners, as well as the suspension of value-added tax hikes on the islands of the eastern Aegean.
The longer this issue is not resolved the more credence will be given to speculation the government could seek early elections as a way out of the impasse.

Government officials are now awaiting the outcome of Tuesday’s Euro Working Group to assess the intentions of its eurozone partners regarding the fate of the short-term debt relief measures.
But regardless of this outcome, government sources insist that a bonus will given to pensioners on December 22 as announced.
Meanwhile, the debate over whether the International Monetary Fund will participate in the Greek bailout program has taken a new twist since Donald Trump’s election victory in November as it is not clear what the president-elect’s stance will be with regard to the Washington-based Fund and its involvement with Greece.
According to sources, Athens could possibly welcome a scenario whereby the conclusion of the review will be achieved with a suspension of the IMF’s participation, as was the case in June 2015.
“It’s not the best thing not to have a complete solution, but it would overcome the impasse,” a senior government aide said.

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